Baker Hughes eyes new exploration and decarbonisation in Angola

Angola

Valter Escorcio, country director for Baker Hughes in Angola, talks to The Energy Year about Angola’s upstream recovery, key trends in the development of marginal fields and Baker Hughes’ role in providing cost optimisation and integrated technology. Baker Hughes provides energy technology services to markets worldwide.

Why did so many Angolan offshore projects reactivate in the final months of 2021?
First, the urgent task of the IOCs operating in Angola right now is to reverse the decline of mature fields, which are the types of fields most of them currently have. Their plan is to increase production and optimise the usage of their infrastructure. They are employing what is referred to as a short-cycle approach, i.e., where you tie back new reservoirs to existing floating production, storage and offloading (FPSO) vessels or existing platforms using minimised capex. These constitute most of the activities we are currently witnessing in the industry.
Incidentally, FPSOs are running below capacity, and as a result, operators desire to address this shortfall with increased production i.e., generating more barrel outputs. Moreover, a larger proportion of activities happening now were those delayed from the last two to five years, and the majority were supposed to commence just before the Covid-19 pandemic hit.

How might the oil barrel price above USD 100 affect upstream developments?
The upward trend of oil prices currently gives companies the confidence to start looking into exploration plans and possibly increase investments in marginal fields and on tie-backs to maximise their FPSOs’ capacity.
The planned developments on the horizon for the next two years mostly concern marginal fields, which became viable following the incentives included in the Angolan government’s 2018 marginal fields decree. Aside from these, we are planning and looking forward to increased exploration campaigns.

How much time will it take until we see some positive effects from the upstream recovery all the way down the energy value chain?
In terms of decisions for 2022, upstream activities will begin having an impact on the actual work volume in 2023 and the following two years. Incidentally, 2022 plans are already being executed – note that whatever clients were executing in 2022 was previously approved in 2021. The eight or nine rigs that you see running today will continue under those plans.
For 2023, we hope to see final investment decisions (FIDs), for example from TotalEnergies on Cameia and from Eni on Agogo. There also is Eni’s NAG [non-associated gas] project, and hopefully, there will be some exploration work with ExxonMobil in 2024. These are the kinds of high-impact projects we want to see happen.

What are the latest developments in cost optimisation within the oilfield services sector?
There continues to be a heavy focus on costs and optimisation. Drilling is being optimised through data, well design and the choice of tools deployed. Lean is the order of the day, so we are already well positioned to meet customer needs with our portfolio of cost-efficient solutions and industry-leading solutions and technology.
Regarding capex, we have new products for topsides infrastructure, as well as the subsea developments. We have Subsea Connect, a package of reservoir-to-topside technology solutions, which is lighter to deploy and more modular than traditional well intervention technology. It requires fewer resources to deploy, and it’s more cost-efficient, up to 80% of project development costs and value drivers for the better. Subsea Connect can lower the economic development point of the entire project by 30%, unlocking more reserves and marginal assets, thus making subsea projects competitive with other projects. In addition, for the topsides, we have different solutions, including optimisation through data and new hardware products.

What are Baker Hughes’ main projects in Angola?
Today, our clients are using many of our well services, which include well drilling, logging and completions, all of which are within Baker Hughes’ standard offering scope. We also have installed bases of subsea oilfield equipment on two major blocks in Angola. These also extend to our supporting these clients with our already-available infrastructure and along with small tie-backs to be added.
Moreover, we also hold a fleet of turbines and compressors on some of the FPSOs in Angola. Meanwhile, we ensure the maintenance and support for these machines, whilst looking forward to new projects to which we can deploy the new equipment.

What are the challenges for Angola in monetising its gas resources?
Most of the productive assets with gas in Angola – including Eni’s NAG project – are feeding into Angola LNG. For the time being, Angola LNG’s output is designated for export, not domestic consumption. Apparently, Angola LNG now has a small deficit in natural gas supply.
With the increased demand largely from European countries, the current high gas prices are favourable to ALNG and its shareholders. Even in the spot market, they are probably generating more capital than they did previously. As a result, there is a logical focus on export.
The authorities would have to consider incentivising local supply to support the electrification and industrialisation drive of the government, ordinary Angolans and the business sector.

Which services does Baker Hughes provide with respect to gas conversion?
In Angola, there are several thermal power plants in operation. Thermal energy was the prime source at the time of these huge investments. However, in recent times, the Angolan State has been exploring options of converting these thermal power plants to gas power. At Baker Hughes, we have the experience, expertise as well as technical solutions to assist the government and plant operators whenever they make the final investment decisions. For example, in the province of Cabinda, the Malongo field is already feeding gas to one of the Malembo turbines supplying the town of Cabinda. More of these investments need to be undertaken.

What are the company’s services related to reducing carbon emissions?
At Baker Hughes, our purpose is that “we take energy forward – making it safer, cleaner and more efficient for people and the planet.” Our three strategy pillars which underpin our purpose are: transform the core, invest for growth and position for new frontiers.
Under the last pillar comes the focus of making strategic bets to drive decarbonisation of energy and industry – i.e., hydrogen, geothermal, carbon capture and storage, and energy storage. As the energy landscape continues to change, we are evaluating the key growth areas associated with energy transition and where Baker Hughes can capitalise on these opportunities. We will pursue strategic bets that leverage our core competencies and expertise today and where we believe we can achieve a differentiated position in the future.
In the case of Angola, work is ongoing as we make steady progress. Looking at what we are going to do, Angola is moving with its gas master plan and the electrification programme. Angola is going to move to gas as the preferred and more environmentally sustainable energy source, which is good for gas turbines and gas compression. As we support the government in this gas master plan, this makes a huge impact on decarbonisation.
We have the technology for flare gas monitoring, measurement, recapture and repurposing. We are looking to discuss technologies like Panametrics – a Baker Hughes business focused on the development of gas measurement solutions – and with quite a few of our customers, helping them achieve their carbon-reduction targets, driving regulatory compliance and cutting costs. It is a first step on the fully renewable spectrum journey, as we go step by step. Nonetheless, it is a huge step as it means we are moving from Angola’s power being generated predominantly by diesel to now gas.
Eventually, we will start to see more discussions about the things we can do around emissions management. When you look at the whole process, where do you have increased emissions? How can you capture that? How can you reduce that? How can you decarbonise the operation? If you look at any operation in Angola, you must look at the gas emissions and figure out what is currently being done and how it can be done better. Baker Hughes, with our portfolio and world-class expertise, is best positioned to help the country achieve its objectives in this regard.

How does the new local content decree affect Baker Hughes’ activities?
The Angolan government decree is well-intentioned, and we support it. It is important to note that before this regulation, Baker Hughes has a long-established presence and history of supporting the industry and the people of this great country.
As an organisation, our history shows that we are a leading advocate and supporter of local content and localisation. We are one of the few companies that can sell and licence its proprietary technologies to local companies, which is a huge differentiator and a very different way of doing business. Over the years, we have seriously invested in manpower capability and infrastructure, which has been reflected in value addition for the industry and the country. In sum, Baker Hughes has been a pioneer when it comes to devising ways to support the local industry.
We have a world-class multimodal facility in Luanda which provides support for our diverse customer base using our world-class Angolan talents whilst also enabling the development of a network of joint venture partners, independent small businesses, vendors and partners in the process. We are proud of our contributions to the nation’s economy and energy industry development.
Besides our views as a service company, there is also the view of the main operators on the application of the local content decree. Some are concerned about operational risks, costs and other complications as a result. Nonetheless, we are confident that all these issues can always be worked out with the good intentions of all stakeholders.

Can you provide us with an example of local content’s potential setbacks?
For example, say you have a local company invest in a considerable amount of firefighting equipment. Firefighting is essentially an emergency service – if there’s no fire, the fire engine is idle. In this case, you have a local company that invested a significant amount of money and time into equipment that they are mostly not putting to use, that is, non-value-yielding assets.
Many companies that are local and have limited resources could put all their resources into a product line that, through no fault of their own, is not used for six months, and they could potentially go bankrupt. We don’t believe tying down huge investments in idle assets was the idea behind local content. Rather, local content is to ensure the transfer of value in the form of technology and knowledge, whilst also ensuring the sustainability of the operators and industry.

What is your strategy for future growth?
Baker Hughes Angola has a largely stabilised and highly skilled workforce. We are engaging with the operator regarding the execution of their pipeline of projects pending rollout/FID. As such, we are now focused on execution especially in wells, subsea developments and turbines, ensuring that our operations meet the required safety and quality standards. Then, we need to consider growth, particularly in wells, subsea and turbomachinery. But we are also looking into the energy transition, decarbonisation and digitalisation. These are the new areas that we will increasingly focus on in addition to our traditional business. That’s the general direction.

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